Minimum Wages in Developing Countries : Helping or Hurting Workers?

This policy note reviews the literature on the effects of minimum wages on labor markets in developing countries. The authors begin by elucidating the challenges to ascertaining these effects, especially in developing economies where a large segment of the workforce is not covered by minimum wage legislation (uncovered sector). After summarizing the theoretical models and their predictions, the authors review the empirical evidence of the impact of minimum wage legislation on wages, employment, and unemployment in the covered and uncovered sectors of the labor market. The evidence strongly suggests that an increase in the minimum wage tends to have a positive wage effect and a small negative employment effect among workers covered by minimum wage legislation and that the effects tend to be stronger among low-wage workers. The findings are quite limited and fairly inconclusive on the indirect effects of increases in minimum wages on workers in the uncovered sectors, where the legislation either does not apply or is not complied with.

Bibliographic Details

Main Authors:	Terrell, Katherine, Almeida, Rita K.
Language:	English
Published:	World Bank, Washington, DC 2008-12
Subjects:	AVERAGE WAGE, COMPETITIVE MODEL, DISPLACED WORKERS, DISTRIBUTION OF INCOME, EARNING, EARNINGS, EARNINGS DISTRIBUTION, ECONOMIC ACTIVITIES, EMPLOYMENT, EMPLOYMENT EFFECT, EMPLOYMENT EFFECTS, EMPLOYMENT POLICY, FIRING COSTS, FIRM SIZE, GENERAL EQUILIBRIUM, HOUSEHOLD INCOMES, HUMAN RESOURCES, INCOME, INCOME DISTRIBUTION, INFORMAL SECTOR, JOB SECURITY, JOBS, LABOR COSTS, LABOR DEMAND, LABOR DEMAND ELASTICITIES, LABOR ECONOMICS, LABOR FORCE, LABOR LAW, LABOR MARKET, LABOR MARKET INSTITUTIONS, LABOR MARKET OUTCOMES, LABOR MARKETS, LABOR RELATIONS, LABOR SUPPLY, LABOR UNIONS, LABOUR, LABOUR OFFICE, LARGE FIRM, LARGE FIRMS, MARKET WAGE, MINIMUM WAGE, MINIMUM WAGES, OCCUPATION, PAID WORKERS, PRESENT EVIDENCE, PRIMARY EDUCATION, PRIVATE SECTOR, PRIVATE SECTOR EMPLOYEES, PROBABILITY, SAFETY, SAFETY NETS, SALARIED WORKER, SECONDARY EDUCATION, SERVANTS, SOCIAL PROTECTION, UNEMPLOYED, UNEMPLOYMENT, UNEMPLOYMENT BENEFITS, UNEMPLOYMENT RATE, WAGE DISTRIBUTION, WAGE EFFECT, WAGE EFFECTS, WAGE GAIN, WAGE INCREASE, WAGE INCREASES, WAGE STRUCTURE, WORK FORCE, WORKERS, WORTH,
Online Access:	http://documents.worldbank.org/curated/en/2008/12/10158898/minimum-wages-developing-countries-helping-or-hurting-workers https://hdl.handle.net/10986/11742
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